While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends and subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 5 stocks with substantial yields, that ultimately, we have rated "Hold." Arbor Realty (NYSE: ABR) shares currently have a dividend yield of 7.80%. Arbor Realty Trust, Inc. operates as a real estate investment trust (REIT) in the United States. The company has a P/E ratio of 24.70. The average volume for Arbor Realty has been 164,000 shares per day over the past 30 days. Arbor Realty has a market cap of $327.7 million and is part of the real estate industry. Shares are up 11% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates Arbor Realty as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and compelling growth in net income. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good. Highlights from the ratings report include:
- ABR's revenue growth has slightly outpaced the industry average of 9.6%. Since the same quarter one year prior, revenues rose by 18.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- ARBOR REALTY TRUST INC has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, ARBOR REALTY TRUST INC turned its bottom line around by earning $0.65 versus -$1.53 in the prior year. For the next year, the market is expecting a contraction of 43.1% in earnings ($0.37 versus $0.65).
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, ARBOR REALTY TRUST INC underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full Arbor Realty Ratings Report.